10 December 2009
Edwin De Boeck
Chief Economist KBC Group
Outlook 2010
How resilient is economic recovery ?
22/12/2009
2
80 120 160 200 240 280 320 360 400 440
Mar-03 Jul-03
Nov-03 Mar-04
Jul-04 Nov-04
Apr-05 Aug-05
Dec-05 Apr-06
Aug-06 Dec-06
Apr-07 Aug-07
Jan-0 8
May-08 Sep-08
Jan-0 9
May-09 Sep-09
EMU US Emerging Markets
Totale return in EUR (MSCI, March = 100)
Equity markets
Upward momentum stalling
0 20 40 60 80 100 120
1 5 9 13 17 21 25 29 33 37 41 45
1929-1932 (Depression) 1973-1976 (Oil crisis) 2007-2009 (Credit crisis)
22/12/2009
3
Comparison with previous stock market crashes (S&P500)
60 65 70 75 80 85 90 95 100 105 110
December 1929 = 100 March 1974 = 100 July 2008 = 100
World trade (volume)
Months since start of decline 60
65 70 75 80 85 90 95 100 105 110
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45
June 1929 = 100 January 1974 = 100 March 2008 = 100
Industrial production (world)
Equity markets
Depression fears have faded
Global economy
Recession ended in the Summer
GDP-growth (annualized, in %)
-10 -8 -6 -4 -2 0 2 4 6 8 10
2008 Q3 2008 Q4 2009 Q1
2009 Q2 2009 Q3
Developed countries
Emerging markets
Real GDP-growth (QoQ, ann., in %)
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Developed
countries -7.2 -8.3 -0.3 2.3
-US -5.4 -6.4 -0.7 2.8
-EMU -6.9 -9.6 -0.7 1.5
-Japan -13.1 -12.4 2.7 4.8
Emerging markets -6.3 -3.9 7.6 7.3
- Asia ex. Japan -5.1 2.5 12.4 9.3
- CEE -7.7 -19.3 2.1 4.7
- Latin-America -8.8 -10.0 2.0 5.7
-6 -4 -2 0 2 4 6 8 10
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
-45 -35 -25 -15 -5 5 15 25 35 45
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Q4 2008 Q1 2009
Q2 2009 Q3 2009
Consumption (QoQ %-change, annualized) Investment (QoQ %-change, annualized)
US EMU Asia
ex.
Japan
Brazil US EMU Asia
ex.
Japan
Brazil
Global economy
Emerging markets pulling the recovery
-15 -10 -5 0 5 10 15
jan/99 jan/02 jan/05 jan/08
0,5 0,7 0,9 1,1 1,3 1,5 1,7 1,9 2,1
Industrial production (YoY % -change, lhs) Ratio orders/inventories (rhs)
Manufacturing supported by inventory cycle
-25 -20 -15 -10 -5 0 5 10
0,5 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3
US EMU
Global economy
Final demand remains weak in developed markets
-3 -2 -1 0 1 2 3 4 5 6 7
US EMU Asia ex.
China
China
Final domestic demand (expected YoY %-change 2009) Discretionary fiscal stimulus for 2009 (% of GDP) (*)
Fiscal stimulus versus final domestic demand
(*) Change in cyclically-adjusted fiscal balances relative to 2008
-3 -2 -1 0 1 2 3 4 5 6 7
US EMU Asia ex.
China
China
Final domestic demand (expected YoY %-change 2009) Discretionary fiscal stimulus for 2009 (% of GDP) (*)
70 75 80 85 90 95 100
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009
12 13 14 15 16 17 18
(*) Change in cyclically-adjusted fiscal balances relative to 2008
60 70 80 90 100 110 120 130 140 150
Q1 1980 Q1 1983
Q1 1986 Q1 1989
Q1 1992 Q1 1995
Q1 1998 Q1 2001
Q1 2004 Q1 2007
-2 0 2 4 6 8 10 12 14
Houshold debt (lhs) Savings quote (rhs)
‘Deleveraging’ households (in % of disposable income)
EMU
Developed markets
Fiscal stimulus versus ‘deleveraging’ households
Fiscal stimulus versus final domestic demand
US
Developed markets
Fiscal stimulus versus ‘deleveraging’ households
-3 -2 -1 0 1 2 3 4 5 6 7
US EMU Asia ex.
China
China Final domestic demand (expected YoY %-change 2009) Discretionary fiscal stimulus for 2009 (% of GDP) (*)
70 75 80 85 90 95 100
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009
12 13 14 15 16 17 18 Houshold debt (lhs)
Savings quote (rhs)
(*) Change in cyclically-adjusted fiscal balances relative to 2008
‘Deleveraging’ households (in % of disposable income)
EMU Fiscal stimulus versus final domestic
demand
-20 -10 0 10 20 30 40 50 60
Germany Austria
Slovenia Belgium
Italy (*) France
Finland Slovakia
Neth erlands
Portu gal
Greece Spain
Ireland Change in household debt-to-GDP
ratio in 2001-2008
(*) Data end in 2007
Labour market
Unemployment rate (in %)
3 4 5 6 7 8 9 10 11
Jan-90 Jan-91
Jan-92 Jan-93
Jan-94 Jan-95
Jan-96 Jan-97
Jan-98 Jan-99
Jan-00 Jan-01
Jan-02 Jan-03
Jan-04 Jan-05
Jan-06 Jan-07
Jan-08 Jan-09
US EMU
Labour market
US - Another jobloss-recovery
-6 -4 -2 0 2 4 6
Q1 1996 Q1 1997
Q1 1998 Q1 1999
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009 Employment (YoY, in %)
Real GDP (YoY, in %)
Unemployment rate (in %)
99 100 100 101 101 102 102 103 103
1 2 3 4 5 6 7 8 9 10 11 12 13
Recoveries 1970-1990 (average) 1991
2001 2009
Employment (index, last month recession = 100)
3 4 5 6 7 8 9 10 11
Jan-90 Jan-91
Jan-92 Jan-93
Jan-94 Jan-95
Jan-96 Jan-97
Jan-98 Jan-99
Jan-00 Jan-01
Jan-02 Jan-03
Jan-04 Jan-05
Jan-06 Jan-07
Jan-08 Jan-09
US
US
Labour market
US – Green shoots indicate recovery next Spring...
Unemployment rate (in %)
3 4 5 6 7 8 9 10 11
Jan-90 Jan-91
Jan-92 Jan-93
Jan-94 Jan-95
Jan-96 Jan-97
Jan-98 Jan-99
Jan-00 Jan-01
Jan-02 Jan-03
Jan-04 Jan-05
Jan-06 Jan-07
Jan-08 Jan-09
US
-900 -700 -500 -300 -100 100 300 500
Jan-91 Jan-92
Jan-93 Jan-94
Jan-95 Jan-96
Jan-97 Jan-98
Jan-99 Jan-00
Jan-01 Jan-02
Jan-03 Jan-04
Jan-05 Jan-06
Jan-07 Jan-08
Jan-09
-15 -10 -5 0 5 10 15 20 25
Payrolls (change, '000, lhs)
Employment expectations (NFIB, rhs)
Home sales prices (YoY %-change)
-15 -10 -5 0 5 10 15 20
Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 Existing New
Home sales
2500 3500 4500 5500 6500
Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 300 500 700 900 1100 1300 1500 Existing(lhs) New (rhs)
3.8 4.8 5.8 6.8 7.8 8.8 9.8
Q1 1990 Q1 1994 Q1 1998 Q1 2002 Q1 2006
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Default rate mortgage market (in % , lhs) Unemployment rate (YoY % -change, rhs)
Mortgage defaults and unemployment
Labour market
… which should support US housing recovery
3 4 5 6 7 8 9 10 11
Jan-90 Jan-91
Jan-92 Jan-93
Jan-94 Jan-95
Jan-96 Jan-97
Jan-98 Jan-99
Jan-00 Jan-01
Jan-02 Jan-03
Jan-04 Jan-05
Jan-06 Jan-07
Jan-08 Jan-09
US EMU
Unemployment rate (in %)
Labour market
EMU – Less resilient than it looks
0 200000 400000 600000 800000 1000000 1200000 1400000
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09 'Kurzarbeit' (Germany)
3 4 5 6 7 8 9 10 11
jan/90 jan/91
jan/92 jan/93
jan/94 jan/95
jan/96 jan/97
jan/98 jan/99
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
EMU Germany
Unemployment rate (in %)
Labour market
EMU – Less resilient than it looks
-8 -6 -4 -2 0 2 4 6
Q1 1996 Q1 1997
Q1 1998 Q1 1999
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009 Employment (YoY, in %)
Real GDP (YoY, in %)
Germany
German unemployment rate without shorter hours
12 %
3 4 5 6 7 8 9 10 11
jan/90 jan/91
jan/92 jan/93
jan/94 jan/95
jan/96 jan/97
jan/98 jan/99
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
EMU Belgium Germany
Unemployment rate (in %)
Labour market
EMU – Less resilient than it looks
0 2 4 6 8 10
Germany Belgium
Austria Portugal
Greece Slovenia
Italy Luxembourg
France Finland
Slovakia Ireland
Spain
EMU
-500 0 500 1000 1500 2000 2500 3000 3500
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
-60 -40 -20 0 20 40 60 80 100 120 140 160
Germany (lhs) Belgium (rhs) Part-time employment for
economic reason (YoY %-change) Increase unemployment rate from trough (mostly early 2008) to peak
3 4 5 6 7 8 9 10 11
jan/90 jan/91
jan/92 jan/93
jan/94 jan/95
jan/96 jan/97
jan/98 jan/99
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
EMU Belgium Germany
Unemployment rate (in %)
-3 -2,5 -2 -1,5 -1 -0,5 0 0,5 1 1,5 2
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
Labour market
EMU – … some green shoots as well
Employment expectations EC-survey (st. dev. from long-term average)
22/12/2009
17 17
Corporate spending
Two speed world
-40 -30 -20 -10 0 10 20 30 40 50
Jan-0 0 Jul-00
Jan-0 1 Jul-01
Jan-0 2 Jul-02
Jan-0 3 Jul-03
Jan-0 4 Jul-04
Jan-0 5 Jul-05
Jan-0 6 Jul-06
Jan-0 7 Jul-07
Jan-0 8 Jul-08
Jan-0 9 Jul-09 US Capital Goods Orders
EMU Capital Goods Orders
China Newly Started Investment Projects
Capital expenditure (YoY %-change)
-3 -2 -1 0 1 2
jan/00 jul/00
jan/01 jul/01
jan/02 jul/02
jan/03 jul/03
jan/04 jul/04
jan/05 jul/05
jan/06 jul/06
jan/07 jul/07
jan/08 jul/08
jan/09 jul/09 EMU Germany Belgium
Export orders EC-survey (st. dev. from long-term average)
22/12/2009
18 18
Corporate spending
Two speed world
-40 -30 -20 -10 0 10 20 30 40 50
Jan-0 0 Jul-00
Jan-0 1 Jul-01
Jan-0 2 Jul-02
Jan-0 3 Jul-03
Jan-0 4 Jul-04
Jan-0 5 Jul-05
Jan-0 6 Jul-06
Jan-0 7 Jul-07
Jan-0 8 Jul-08
Jan-0 9 Jul-09 US Capital Goods Orders
EMU Capital Goods Orders
China Newly Started Investment Projects
Capital expenditure (YoY %-change)
65 70 75 80 85 90
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009
US EMU China
Capacity utilization in manufacturing (in %)
22/12/2009
19 19
Corporate spending
Two speed world
-40 -30 -20 -10 0 10 20 30 40 50
jan/00 jul/00
jan/01 jul/01
jan/02 jul/02
jan/03 jul/03
jan/04 jul/04
jan/05 jul/05
jan/06 jul/06
jan/07 jul/07
jan/08 jul/08
jan/09 jul/09 US Capital Goods orders
EMU Capital Goods Orders
China Newly started Investment Projects
Capital expenditure (YoY %-change)
-20 -10 0 10 20 30 40
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
US EMU China
Bank loans to the private sector (YoY %-change)
22/12/2009
20 20
Corporate spending
Two speed world
-40 -30 -20 -10 0 10 20 30 40 50
jan/00 jul/00
jan/01 jul/01
jan/02 jul/02
jan/03 jul/03
jan/04 jul/04
jan/05 jul/05
jan/06 jul/06
jan/07 jul/07
jan/08 jul/08
jan/09 jul/09 US Capital Goods orders
EMU Capital Goods Orders
Capital expenditure (YoY %-change)
-20 -15 -10 -5 0 5 10 15 20 25 30
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09
US EMU
Bank loans to the private sector (YoY %-change)
Credit crunch …?
22/12/2009
21 21
Corporate spending
Two speed world
-40 -30 -20 -10 0 10 20 30 40 50
Jan-0 0 Jul-00
Jan-0 1 Jul-01
Jan-0 2 Jul-02
Jan-0 3 Jul-03
Jan-0 4 Jul-04
Jan-0 5 Jul-05
Jan-0 6 Jul-06
Jan-0 7 Jul-07
Jan-0 8 Jul-08
Jan-0 9 Jul-09 China Newly Started Investment Projects
Capital expenditure (YoY %-change)
-20 -10 0 10 20 30 40
jan/00 jan/01
jan/02 jan/03
jan/04 jan/05
jan/06 jan/07
jan/08 jan/09 China
Bank loans to the private sector (YoY %-change)
…or credit bubble ?
-30 -20 -10 0 10 20 30 40 50 60 70 80
Q1 2000 Q1 2001
Q1 2002 Q1 2003
Q1 2004 Q1 2005
Q1 2006 Q1 2007
Q1 2008 Q1 2009
Households - mortgages Households - consumer finance Corporates
US (Senior Loan Officer Survey Fed)
-30 -20 -10 0 10 20 30 40 50 60 70 80
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
EMU (Survey ECB)
Banks reporting tighter credit conditions (in %, central bank surveys)
Credit crunch?
Easing
22/12/2009
23
0 100 200 300 400 500 600
jan/00 sep/00
mei/01 jan/02
okt/02 jun/03
feb/04 nov/04
jul/05 mrt/06
nov/06 aug/07
apr/08 dec/08
aug/09
US EMU
Credit spreads corporate bonds (iBoxx, in bps.)
Credit crunch?
Easing
0 5 10 15 20 25 30
1925 1935 1945 1955 1965 1975 1985 1995 2005
Investment grade Total Discounted in investment grade corporate bonds at the
peak of the crisis
Current discount (recovery rate = 20%)
Cumulative 5-year corporate default rate (US)
-4 -3 -2 -1 0 1 2 3
jan/03 jul/03
jan/04 jul/04
jan/05 jul/05
jan/06 jul/06
jan/07 jul/07
jan/08 jul/08
jan/09 jul/09 All businesses (ISM)
Small businesses
Producer confidence US (st.dev. from long-term average)
-30 -10 10 30 50 70
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009 Large firms tighter credit Small firms tighter credit
Credit crunch ?
Easing, also for SME’s
-30 -10 10 30 50 70 90
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
US
EMU
